U.S. markets showed little reaction to the U.S.-North Korea summit to start Tuesday’s session but picked up momentum afterwards with fresh all-time highs back in play.

A joint statement and signed agreement came out of the summit, with details and further verifiable progress to be decided at future dates.

The Fed’s FOMC meeting will now take center stage with an announcement coming out Wednesday afternoon on interest rates.

Volatility remained calm and is on the verge of testing May and June lows.

The Nasdaq was up 0.6% following its push to 7,708 and fresh lifetime high while settling above the 7,700 level.

The Russell 2000 rallied 0.5% after testing an all-time high of 1,686 and remains on track to trip 1,700 on continued strength.

The S&P 500 added 0.2% after testing a high of 2,789 but failed Monday’s peak by a half-point with major resistance remaining at 2,800.

The Dow was the weakest link, but was only down just over a point, or 0.01%, following the backtest to 25,247 and tight 117-point trading range.

As a side note, the Dow Transports cleared 11,000 to start the week and were up again today.

Utilities and Real Estate paced sector leaders with gains of 1.2% and 0.6%, respectively.

Energy and Financials were down 0.8% and 0.2%. Industrials and Health Care were lower by 0.1% to round out the sector laggards.

The Q1 earnings season turned out to be very strong, with growth reaching a 7-year high with broad-based momentum on the revenue side.

The focus will now shift to Q2 earnings that begins in early July. However, there will be still be earnings announcements between now and then as companies with different fiscal years will be reporting throughout the rest of June.

Total Q2 earnings are expected to be up 17.9% from the same period last year on 7.9% higher revenues, with a number of sectors expecting to show double-digit earnings growth.

Global Economy – European markets finished mostly in the red despite lowered geopolitical concerns as Germany’s forecasts for economic growth fell shy of forecasts.

UK’s FTSE 100 and France’s CAC 40 gave back 0.4%. The Stoxx 600 Europe dipped 0.1% and Germany’s DAX 30 slipped a half-point, or 0.0% The Belgium20 climbed 0.1%.

The German June ZEW survey expectations of economic growth fell 7.9 to a negative 16.1, weaker than expectations for a drop of 5.8 to -14.

Asian markets were mostly higher despite mixed economic news as traders focused on the prospects of peace in the Korean peninsula.

China’s Shanghai jumped 0.9% while Japan’s Nikkei rose 0.3%. Australia’s S&P/ASX 200 added 0.2% and Hong Kong’s Hang Seng climbed 0.1%. South Korea’s Kospi was lower by a point, or 0.05%.

China May new yuan loans rose 1.15 trillion yuan, missing forecasts of 1.20 trillion yuan. May aggregate financing rose 760.8 billion yuan, below estimates of 1.30 trillion yuan.

Japan May PPI was up 0.6% and +2.7% year-over-year, topping expectations of 0.2% and 2.1%, respectively.

The Japan Q2 BSI large all-industry business conditions dropped 5.3 to -2, and the lowest print in a year.

The Q2 BSI large manufacturing business conditions fell 6.1 to -3.2, the lowest in 2 years.

The NFIB Small Business Optimism Index jumped 2.9% to 107.8 in May after edging up 0.1% to 104.8 in April. The May number is the second highest on record, spanning 45 years, and topped only by the 108 print from July 1983.

Gains were broadbased across components, with 37% now expecting a better economy, versus April’s 30%. Plans to hire climbed to 18% from 16%. Additionally, expectations of increased selling prices rose to 19% from 14%.

The Consumer Price Index rose 0.2% in May, with the core up 0.2%, matching expectations. The annual pace accelerated to 2.8% year-over-year for the headline from 2.5%, and 2.2% for the core versus 2.1%.

Energy prices were 0.9% higher while Transportation prices edged up 0.4%. Services costs rose 0.2% and Housing costs were up 0.2%, with owners’ equivalent rent higher by 0.2%.

Apparel prices were unchanged and Medical care costs rose 0.2%. Education and computer prices rose 0.4% while Tobacco prices were up 0.4%.

Redbook Store Sales were up 4.3% for the year in the week ending June 9th.

The May Treasury Budget checked in at -$146.8 billion, missing estimates of -$144 billion.

Market Sentiment – The FOMC is widely expected to hike rates 25 basis-points following its w-day meeting with an announcement on Wednesday at 2pm (EST). Wall Street will be more interested in forward guidance via the dot-plot, where there’s considerably more uncertainty.

Although the Fed is widely expected to upgrade its outlooks on growth and inflation, and trim the unemployment rate, analysts don’t look for policymakers to significantly alter their views on the rate trajectory, underscoring the gradual path that’s been the Committee’s hallmark and mantra for years.

There is some expectation that an upgrade in the dots could reflect a total of four rate increases this year versus the current estimate for three.

We have also mentioned the possibility of the Fed tweaking the IOER rate, as suggested in the FOMC minutes. The combination of the two measures could provide some support to both the bond and stock market.

The iShares 20+ Year Treasury Bond ETF (TLT) snapped a two-session slide
following the opening pullback to $118.84.

Upper support at $119-$118.50 and the 50-day moving average held for the 4th-straight session with a close below the latter being a slightly bearish development.

Lowered resistance is at $119.50-$120 with the session high reaching $119.46.

Market Analysis – The Russell 3000 Index ($RUA) closed higher for the 7th-time in eight sessions after reaching a peak of 1,662. Fresh resistance is at 1,670-1,680 with the January peak 1,694.

We have been mentioning continued closes above prior resistance at 1,640-1,650 and February/ March hurdles would be a bullish signal for higher highs.

These levels are now serving as short-term support. A close below 1,640 would signal a short-term top.

RSI is trying to clear and hold December and early January resistance at 70. A move above this level would signal continued strength and a possible push towards 75-80. Support is at 65-60.

The Financial Select Sector Spiders (XLF) closed slightly lower for the 2nd-straight session following the backtest to $27.81.

Near-term support at $27.75 and an up trending 50-day moving average held with a close below the latter leading to further weakness towards $27.50-$27.25 and the 200-day moving average.

Resistance is at $28-$28.25 with continued closes above the latter being a slightly bullish signal.

RSI is trying to hold support at 50 and a level that held before the late-May breakdown below this level and early June recovery.

Continued closes back below this level would be a slightly bearish signal for a retest to 45-40.

Upper resistance from February, March and May is at 55-60 with continued closes above the latter signaling a return of momentum

Existing Position Update

Expecting pullback on PYPL

TSLA laid off 9% of it’s labor force. If more negative news develops – we could see strong selling pressure develop over the near term.

I’m looking at AMZN and NVDA at this time since both appear to be setting up for iron condors.

Will update you tomorrow as usual.

Roger Scott